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AHDB Pig Market Weekly

17 October 2013

AHDB Pig Market Weekly - 17 October 2013AHDB Pig Market Weekly - 17 October 2013

Pig supplies in the EU are expected to remain tight until at least the middle of 2014, according to figures from the EU Commission’s forecasting working group on pig meat.


Tight EU supplies set to continue

Slaughterings fell by over 1% in the first half of 2013 but the decline is expected to be larger in the second half of the year. According to the forecasts, throughputs in the second half of the year are set to be between 3% and 4% lower than in the same period last year. This is largely the result of the decline in the breeding herd recorded recently due to a combination of poor profitability and new welfare regulations. While the drop will be smaller, reduced slaughterings will continue into the first half of 2014, with a fall of 1% forecast.

The working group also considered the likely impact on pig prices. Given recent price falls, the overall view was that prices would remain subdued in the short-term. EU consumers are still struggling financially and have increasingly been switching from pork to chicken. Prices were thought likely to stabilise towards the end of the year and into 2014, before beginning to rise again, although this is partly dependent on the weather being better than it was in spring 2013.

UK pig price

The EU-spec DAPP edged up again for the week ended 12 October. At 171.69p per kg, this was a week-on-week change of 0.20p per kg. However, the annual difference was much larger at 15p per kg, although the gap has come down in recent weeks as prices were rising more quickly this time last year. In addition according to historic trends, prices would typically ease during this time of the year so the gaps compared with the 2011 and 2010 levels have been increasing. The weekly estimated throughputs for the same week totalled 179,000 head, 13,100 more compared with the same week last year. The average carcase weight for the week ended 12 October was almost unchanged at 80.05kg, almost a kilo up on the year.

The average 30kg weaner prices fell for the second consecutive week to £54.13 per head. This is a contrast to the general trend where the weaner market is expected to follow the finished pig market. This is reportedly due to a shortage of finishing accommodation, meaning demand is limited despite the potentially positive returns to finishers. However, breeders have continued to receive more than last year, with the price currently £13 higher.

EU July slaughterings up on the year

EU slaughtering figures for July show a kill of 20.7 million, around 3% more than in the same period in 2012. This goes against the trend in the year to date, for which throughputs are currently down 1%. However, as July this year had an additional working day compared with July 2012, the underlying position was one of lower throughputs. Carcase weights were higher on the year, as they have been for a number of months, resulting in July pig meat production of 1.84 million tonnes. This was close to 4% higher on the year, although still an underlying decline in production when the extra day is taken into account.

Production increased on the year in most member states, with the Netherlands the most notable exception. Despite the additional working day compared with last year, throughputs were down 8% there. This could be attributable to the significant rise in live exports, leaving fewer animals for domestic slaughter. Romania and Italy both recorded double digit increases while French throughputs were nearly 7% up on the year, having declined 2% overall in the year to date. Other major producers showed only modest increases roughly in line with the average, although for Poland, the 4% rise bucked the trend of significantly reduced production seen in most months of the year.

Provisional figures for August indicate supply remained tight in all countries which have released data so far. Even allowing for one working day fewer than in 2012, the underlying tightening trend appears to have continued.

Brazilian pork exports down in first nine months of 2013

Brazilian pork exports weakened in the first nine months of this this year and were down 10% compared with 2012. The majority of the decline was a result of lower shipments to Ukraine, Brazil's largest market last year but only the third largest so far this year. Shipments to the country came down by 45% which was largely due to the ban placed on Brazilian pork earlier this year. However, last year Brazil shipped unusually high volumes of pork to Ukraine and the recent figures indicate that exports were somewhat higher than for the equivalent nine month period in 2011.

In contrast, Russia regained its position as the main export market for Brazil, with shipments increasing by 6% on the year, although they were still well below pre-2011 levels. Brazil has been able avoid the worst effects of Ractopamine-related restrictions placed on pork imports by Russian Authorities. Shipments to the other major market, Hong Kong, were up by 2% compared with the January to September period last year. The value of Brazilian exports totalled R$1.95 billion, 3% up on the year, helped by weakening of the real against competitor currencies.

Producer share of retail price edges up in September

The average farm gate price passed the 170p per kg mark in September, almost 17p above the previous year’s level. At the same time, the retail price during the month edged up only marginally, which meant that producers received 43% of the total retail price. This was one point higher compared with the previous month but producers received 3% more than the same month in the 2012. The producer share of bacon prices in August and early September stood at 38%; this was 1% and 2% above the previous year’s levels respectively.

Retail pork prices in September showed increases across all cuts compared with the same month in 2012. There were above average increases of 7% for minced pork and boneless leg. Boneless shoulder and loin steak price were 6% higher on the year. Traditional pork sausages were up 4% up on the year, while pork fillet and loin chops increased by a slower rate. The month-on-month change varied across the different cuts, with 1% decreases recorded for minced pork, diced pork, loin chops and fillet end leg. In contrast, loin steaks were priced 4% above their level a month earlier. On average retail pork prices in September were 4% higher than year earlier levels.

Feed market update

The UK feed wheat Nov-13 futures price closed at £163.35/t on Tuesday (15 October), up 1% on a week ago. The Chicago Dec-13 maize futures price also increased slightly over the week to $174.61/t but the Chicago Dec-13 wheat futures price closed $2.85 lower on the week at $251.94/t. The Chicago wheat/maize spread has reached its largest level since 2008 which is likely to be unsustainable in the medium term. It has already come under pressure in recent days, and could lead to lower wheat prices.

The Dec-13 Chicago soyameal futures price closed at $443.44/t on Tuesday (15 October), down by $13.91 (3%) on the week, as National Oilseeds Processors Association (NOPA) data showed the US crushed more soyabeans than expected in September.

However, the tight old stock supplies meant that this was still the smallest amount of soyabeans crushed at any point over the last 4 years. In the UK, the Hi pro soyameal (Ex-store, East Coast) price for October delivery was £405/t as at 11 October, an increase of £11 on the previous week.

To read more about the latest developments in the feed market, click here.

EU meat production to rebound in 2014

According to the latest Short Term Outlook from the EU Commission, EU meat production is set to increase slightly in 2014, following two years of declining output. Both beef/veal and pig meat are forecast to return to growth next year while poultry production will also rise, as it has done in 2013. However, sheep meat production is expected to be lower again in 2014.

The report estimates that pig meat production will be just over 1% lower than last year for 2013 as a whole, broadly in line with other forecasts. This is expected to lead to a modest fall in pig meat exports during the year, with EU consumption also set to be 1% down. The decline in exports is also predicted to continue into 2014 but consumption should start to recover.

The publication also looks at prospects for arable crops. For cereals, a good harvest in the EU and worldwide is likely to relieve the tight situation of 2012/2013, especially for animal feed. Overall cereal production in the EU is forecasted at 301.5 million tonnes, up 8% from last year with similar growth rates for the three main crops, wheat, barley and maize. Production of oilseeds and other protein crops are also set to be higher. Cereal stocks are expected to recover to almost 40 million tonnes, a stock to domestic use ratio of 13%, up from 9% in 2012/13.

The full report can be downloaded by clicking here.

Grain Market Outlook Conference

AHDB/HGCA’s annual Grain Market Outlook Conference took place on Tuesday. The conference examined prospects for the global cereals and oilseeds markets, as well as taking a look at the Chinese market and the resilience of the UK cereals industry. Copies of the presentations from the conference can be downloaded by clicking here.

DOWNLOAD REPORT:- Download this report here

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